By Rob Starr, Content Manager, Big4.com
Global volume and value of announced M&A rose by 4% and 25% respectively, in Q4 2012, compared to the previous quarter. Despite this rise in activity levels, the conversion rate of deals progressing through to completion declined by 5% quarter-on-quarter (q-on-q), according to the Ernst & Young M&A Tracker, released recently.
The Ernst & Young M&A Tracker, is compiled by Ernst & Young and the M&A Research Centre at Cass Business School from six different transaction data sources, which are consolidated and compared to activity levels in Q1 2010 using a proprietary weighted-average methodology.
In a sign of continued challenges for transaction completion, the number of deals completing in the last nine months of the year is currently at their lowest since the first quarter of 2010.. In Q4 2012, we are also seeing the longest average time to completion (including outstanding or pending bids), which increased for two consecutive quarters and is currently at its highest of 58 days.
One part of the M&A activity arena which has shown signs of recovery in the last quarter of 2012 is the interest in public bids. In Q4 2012, the volume of public bids was up by 12% q-on-q and the corresponding announced deal value rose by 27%. In terms of the annual figures, activity has been relatively stable, with deal volume in 2012 increasing by 3% year-on-year (y-on-y), although total announced deal value has decreased by 5%. It is worth noting that in Q4 2011, total announced deal value in this category was down by 33% q-on-q, which was then followed by two quarters of low levels of activity. 2012 ends on a more positive note, which could be a leading indicator of activity picking up in 2013.